Bangladesh Government warned on Monday it would hike state-set fuel prices soon as the government forecast it would lose $1.2 billion this fiscal year due to soaring global energy costs.
'We simply don't have any alternative but to hike the prices as soon as possible,' said deputy energy minister M. Tamim.
The Bangladesh Petroleum Corp. (BPC), the nation's monopoly oil importer and distributor, sells fuel at prices decided by the government.
BPC officials said the company was racking up losses of 50 cents for each litre of diesel it sells. Diesel is the main fuel used for vehicles in the nation which has no domestic oil fields.
"Already this fiscal year (to June 2008) we are going to incur losses of around $1.2 billion due to selling oil much more cheaply than international market rates. We will raise the price very shortly," Tamim said.
In April 2007, Bangladesh's military-backed government raised fuel prices by as much as 21 percent. At that time, it believed the oil price would stabilise around $70 to $80 a barrel.
But last week global oil prices topped a record $135 a barrel with experts forecasting further rises due to tight supply and increasing demand.
Inflation, which has been running at double-digit levels since August 2007, has made the government wary of raising fuel prices further despite pressure from multilateral aid agencies.
Tamim promised there would be 'still be a strong subsidy' after the next price hike while some farmers would get cash handouts to cope with the situation.
'We will protect marginal farmers from the price hike's impact. We will earmark a very big portion of the subsidy for the farmers in the upcoming budget' to be announced in early June, he said.
Over 70 percent of Bangladesh's 144 million people depend on agriculture, with farmers heavily relying on diesel to pump underground water for irrigation.
Bangladesh imported 3.8 million tonnes of mostly refined oil during the last financial year at a cost of over $2 billion.
BPC said "fuel import costs this year would hit more than $3 billion, accounting for 18 percent of the total overall import bill."
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